Bonus schemes operated by employers will often make eligibility dependant on matters such as attendance. A recent case illustrates how such schemes can fall foul of disability discrimination law.

Background

The Land Registry operated a discretionary bonus scheme under which all eligible employees received a bonus of £900 (pro-rated for part-timers).  However, under the terms of the scheme, an employee who had received a formal warning in respect of sickness absence during the relevant financial year was ineligible to receive the bonus.  Five employees brought claims of disability discrimination after they were denied bonuses on account of sickness absences, which in each case were attributable to a disability.  The Land Registry had made reasonable adjustments to assist the Claimants in overcoming their disabilities and in adjusting the usual trigger points at which the warning procedure became engaged.  Despite those adjustments, however, each Claimant had received a warning.  Under the bonus scheme managers had no discretion to disregard those warnings; in contrast, the terms of the scheme did allow managers to disregard warnings given for conduct related matters in appropriate circumstances.

Claim of disability discrimination upheld

In a decision subsequently upheld on appeal, the Employment Tribunal ruled that the denial of bonuses to the Claimants was discrimination arising from disability, which contravened section 15 of the Equality Act 2010.  This kind of discrimination arises where an employer treats a worker unfavourably because of something arising in consequence of that person’s disability, and the employer cannot show that the treatment is a proportionate means of achieving a legitimate aim. 

On the facts of this case, the employer had treated the claimants unfavourably because they had received a warning for sickness absence and in each case the absence had been caused by the claimant’s disability. Neither the Tribunal nor the EAT had any hesitation in concluding that the Land Registry had treated the claimants unfavourably (by not paying a bonus) because of something arising in consequence of their respective disabilities.

As to justification, it was common ground that the Land Registry had a legitimate aim, in operating the bonus scheme, of acknowledging employees’ contributions towards corporate achievements and of encouraging and rewarding good performance and attendance.  However, the Tribunal ruled that the Land Registry had not established that the scheme was a proportionate means to achieve that aim.  In reaching this decision, the Tribunal balanced the discriminatory effect of the condition (non-payment to an employee with a sick absence warning) on the Claimants. Two factors in particular swayed the decision in the Claimants’ favour: firstly, the (unexplained) anomaly whereby managers had no discretion to declare that a sickness absence warning would not affect their eligibility for the bonus, but did have that discretion where the bonus related to conduct; and secondly, the scheme did not permit account to be taken of any improvement in performance post-warning.

Comment

The fact that the Claimants based their claim on section 15 of the Equality Act meant that the Tribunal did not have to grapple with the more complex questions that arise when the complaint is one of failing to make reasonable adjustments.  It is clear from this case that when a disability leads to absence then any unfavourable treatment that results from that absence is likely to be caught by section 15. Whether or not there has been a breach of the Act will then depend on whether the employer can justify the unfavourable treatment or show that they were not aware of the disability, and could not reasonably have known about it. 

In this particular case, the problem faced by the employer was that managers were unable to make allowances in the case of sickness absence warnings, whereas they did have that discretion in the case of warnings for misconduct. As the employer did not explain that disparity their justification argument failed. A more proportionate system would have enabled managers to assess individual cases on their merits in all cases where warnings had been given and not just those involving misconduct warnings.  What this case does not tell us, however, is how an employer would be expected to exercise that discretion in any given case. There is no suggestion that all disability related absences (and warnings for such absences) need be disregarded for a scheme to be considered fair but exactly when and how much allowance should be made for such absences is not easy to gauge.

Houghton and others v Land Registry, EAT, 12 February 2015